To provide personal loans, is one type of activity which requires a license in most of the jurisdictions in South East Asia. In Thailand, providing personal loans is classified as non-banking business. After Thailand experienced the economic crisis in 1997, the non-bank business became more well-known as a business that is involves a financial intermediary in providing loans to consumers who cannot access bank loans. H&P law firm in Bangkok have prepared this brief summary of relevant legal aspects of this business model in Thailand.
In Thailand, there are numerous types of money lending services. Although, among the most famous is called “Nano Finance Business”, which is stipulated by Bank of Thailand and the Ministry of Finance for individuals and has the objective to lend the money to a person who does not have a specific amount of income, cover providing uncollateralized loans to retail consumers. This type of lending service does not need the customer’s financial documents or mortgage securities. The details for Nano Finance are as shown in the table below:
(Including interests, fines charges and service fees)
|Not exceeding 36% per year|
|Interest Calculation||Effective Interest Rate|
(amount per person)
|Maximum of 100,000 baht|
|Loan Targets||Promote better access to capital, increase occupational opportunities, reduce illegal lending|
For the investors who are interested in Nano Finance Business, we should apply for permission on money lending license and the whole process of applying for the license should take around 60 days, with these preliminary qualifications:
- Be a juristic person (either private company or public company)
- Have the purchased capital at least 50 million baht and have the shareholder not less than the purchased capital (50 million baht)
- Do not have the D/E ratio over 7 times.
- Do not have previous criminal records for offences such as money laundering.
Our lawyers in Bangkok recommend hiring Thai legal professionals to prepare the applications and avoid setbacks or rejections when it comes to obtain the licenses to operate this business. Some of the relevant documentation to be submitted includes:
-List of shareholders registration
-Financial status documents
-Directors’ resolution on providing the money lending service
-The passport of main shareholders and the directors
-Company policy and handbook
-Supporting documents showing, lending policy according to Bank of Thailand
Nano Finance Business is a new business opportunity, especially for investors who are already in leasing and personal loan business because the business operators will gain an advantage over accessing borrowers, as the operator can gain more channels to assess customers.
For the company structure, the foreign-owned company would require the BOI or foreign business license in order to incorporate in Thailand. Unfortunately, a foreign company, which has the main objective of lending money, cannot apply for FBL. However, the foreign investor can register a private limited liability company, holding 49% of shares. Nonetheless, in this circumstance you still must apply for the license to the Bank of Thailand as mentioned above and do not have to apply for the FBL.
If you need to consult with a lawyer in Thailand regarding the money lending license, please contact our law firm in Bangkok at [email protected]